Tesla Q1 Earnings Call: Tidbits You May Have Missed

Tesla reported Q1 financials yesterday which was unusually full of several surprises and all pretty positive for Tesla bulls.

Aside from learning that Elon Musk has set up camp at the Fremont factory and has a sleeping bag near the end of the Model X production line, the Tesla CEO also revealed several unique tidbits during the Q1 conference call.

The Tesla Fleet

Elon was asked what kind of advantage is the “fleet”? He answered that: “data is everything. Teslas drive million of miles per day. We will likely need an even larger amount of data: billions of miles per day. Once high volume statistics are available, we will be able to replace humans to improve on the number of fatalities.” Interestingly Elon stated that Tesla does not have a goal to forbid manual driving, but autonomous safety should always aid in avoiding accidents. But people that like to drive manually (i.e., people like me that like to set up “launch mode” while waiting on traffic lights) should be allowed to drive as they please [I know I’ll get comments for saying this :-)].

Model 3

A very interesting new piece of information was the July 1, 2017 deadline for suppliers of Model 3 parts. Elon said that “one always needs a deadline, even if July 1 for SURE will not be met, as something is always late.” The model 3 will be the first car designed to be easy to make. When asked if there is any recourse against suppliers that fail commitments Elon said that Tesla will meet with the Team of each supplier, not just the CEO. And they will get commitments from what he called the “A-Team” of each supplier.

When asked if Tesla will need more capital this year, Elon stated that he does not want to rely on Model 3 reservations for capital. So there will be a need of a combination of capital & debt.

Regarding the demographic of Model 3 reservation holders, Elon disclosed that 93% of reservation holders are new Tesla customers, while 7% are owners. And unexpectedly the Model 3 announcement actually increased demand of Model S vehicles.

New plant(s) and Gigafactories?

The issue of the need for additional plants for Model 3 was raised by several brokers. Elon responded that manufacturing in Europe and Asia would be more efficient, but Tesla would not raise new funds for a new factory until Fremont was at capacity, possibly at 1M vehicles / year. One big “new” unexpected item in this regard was the prediction that Tesla would deliver 1M vehicles in 2020. And also unexpected was that Elon believes this is feasible in Fremont. On the other hand Elon asked himself “but is it wise? Probably better to localize production by continent”. Similarly Elon was asked if Tesla would need a second Gigafactory for Model 3 delivery. He answered that Tesla can continue to expand and not steal from Tesla Energy to deliver Model 3.

Production numbers

Elon disclosed that current production is at about 2,000 vehicles / week, with 40% Model X and 60% Model S. He admitted also that “Model X is the most difficult car to manufacture EVER.”

The new production goal in 2018 is now 500K vehicles, 2 years earlier than originally expected, due to high Model 3 demand. The “S ramp” to that number is very difficult to predict, especially the early exponential part. He then opened his “crystal ball”: he actually predicted “maybe 100-150K Model S & X, 300-400K Model 3. Hard to say.”